Chipotle Mexican Grill, Inc. (NYSE: CMG)recently announced to increase its share repurchase program by another $100 million to further boost stock prices and help the stock recover from a plunge that was initiated by E. coli and norovirus outbreaks.
Chipotle has been very aggressive with its stock repurchases in recent months. For the past quarter ended March 31, the company repurchased over 1.2 million shares of common stock for a total cost of $576.6 million. The buyback in the past quarter represented 4% of Chipotle`s shares, and there were 29,201,412 shares outstanding remain as of the April 22, 2016, SEC filing after the repurchase. However, despite of the aggressive buyback program, shares of Chipotle drops 1.9% from $479.85 on December 31, 2015 to $470.97 on March 31, 2016 during the past quarter. The continued buyback program will allow the company to buy back additional about 220,000 shares given the current stock price.
Opinions are mixed on Chipotle`s buyback programs. While most analysts believe that Chipotle's management should focus more on food sales. The company can spend the money on technology innovation, food improvement or restaurants remodeling instead of repurchasing stocks. The share price will recover on its own if they can attract customers back. But Chris Arnold, a Chipotle spokesman, says the buybacks aren’t crowding out spending elsewhere.
“We are absolutely not forgoing other investments by buying back our stock,” Arnold said. “This is not an either/or proposition. We are able to buy back stock and make other strategic investments.”